Operations

How Much Money Does Each Of Your Vehicles Make?

Martin Romjue
Posted on July 1, 2008

H.A. THOMPSON has emerged as one of the industry’s foremost experts on fleet financials for small to medium-sized operators. A focus on each vehicle’s profitability was one of the key reasons why Thompson’s company, Rose Chauffeured Transportation Ltd. of Charlotte, N.C., won LCT’s 2008 Operator of the Year Award in the 31-50 vehicles category.

 

Thompson, 74, started his limousine service out of his backyard in 1985 after a career as a Charlotte-area radio station host and announcer. In this decade, Thompson has capitalized on innovations and consultants to build up a highly profitable 35-vehicle company. Now, as an industry statesman, not to mention a southern gentleman, Thompson offers operators some advice on keeping fleets financially viable during this year’s volatile economic climate.

 

LCT: What’s the first step to solid fleet financials?

Thompson: When I had four, five, or six cars, I used to keep real good records. You have to keep records. If a car goes out 10 times, and it earns $300 each time, you’ve grossed $3,000 for the month. I determined benchmarks years ago. If you park on your own property, you have no garage over-head. If your office is in-home, you don’t have office expense. What you have to do in the very beginning, whether you have two or 200 cars, is keep records of gross sales on a monthly basis. Say what each sedan or limousine did. If one did lousy, ask why?

 

LCT: How do you avoid wasting money?

Thompson: The worst you can do is have a favorite car. The only value to a car is if it makes you money. . . Watch out for under-producing vehicles. That will make you broke faster than anything. Get rid of a car or two, and wait for things to get better if you have to.

 

LCT: How did your fleet financials program come about?

Thompson: Six years ago, when I hired a consultant, the first thing he said was, ‘You have too many vehicles.’ Each vehicle made an average of $4,629 per month. That’s a number that’s very important. We got rid of three cars. Your benchmark needs to be about $7,500 per month. Our goal for limousines is $12,000 a month; for mini-bus passenger buses, $15,000; $10,000 for sedans; $8,000 for SUVS; and for vans, $12,000. We were under $5,000 per vehicle. We were making some money, but of the 18 vehicles, two or three vehicles did only $2,000 to $3,000 per month. You don’t want to keep vehicles that are not producing.

 

LCT: What is a good vehicle-buying strategy?

Thompson: We started out doing lots of weddings, socials, and proms. As we got bigger, we focused on corporate. We now have 35 vehicles and two limousines. We are not in the party ride business. You need to make sure you get the business, and then buy the car. Create the business, and then get the car.

 

LCT: What is a reasonable revenue growth benchmark?

Thompson: Small business enterprises should double their revenues every five years. You have to grow each year. That’s a yardstick for a variety of entrepreneurial businesses. Businesses either grow or die. You can only keep a small business for so long until someone will come along and compete and get you.

 

LCT: What lessons did you learn about fleet financials along the way?

Thompson: When you start your business, you shoot from the hip and you gamble. But when you get big enough, you don’t make mistakes or buy the wrong car. I bought a 33-passenger bus years ago, but I was way ahead of my time. It wasn’t near up to par. We struggled with that for three years before we sold it. Look at what your cars are doing, and what your business is doing, and analyze it. We had to get into the SUV business four, five years ago. The trick is, how many days does your car sit and not turn a wheel? That’s a big tip off. If sitting a few days, then you must work hard the other days to cover it.

 

LCT: What computer program works best?

Thompson: FASTTRAK is terrific. That breaks out all the cars. I’ve got the gross on every vehicle. None of the smaller operators will have numbers like this. We did $13,900 per vehicle in April. That was a good month.

 

LCT: How often should a company adjust per vehicle revenue benchmarks?

Thompson: $7,500 was our first benchmark. Now the goal in sedans is about $10,000. We don’t raise it every year. We could still make a profit at $8,000. If you keep in the fleet a low-producing car, you’re eating up profits real fast.

 

LCT: How do you manage your fleet turnover?

Thompson: We keep sedans three years or less. 2004 is the oldest year in our fleet. We buy new, sometimes used, and six months old. We run limousines four years and trade them. Minibuses you can run six years. You have to keep them maintained. You have to spend money on maintenance. You can’t have any rattles. The car has to be clean.

 

LCT: What are some rules for keeping a good expense-to-revenue ratio?

Thompson: You have to estimate things like rent, gasoline, and insurance per vehicle, on average per month. That’s sophisticated accounting for an operator. You need someone in accounting who can do it for you. Banks see you are serious and are more willing to loan you money if you need it. I always had one. Now I have a CFO who is a numbers guy. I’ve also been very good about not mixing lifestyles into my business. I don’t drive a Mercedes and charge it to my company. . . If you do that kind of thing, you’re not getting a true picture of what the business is doing. You have to be very disciplined about money.

 

LCT: What else related to fleet financials helps an operator’s bottom line?

Thompson: If you can deliver service, and your drivers are sharp, that’s where the rubber hits the road. Nothing else matters if you can’t be early.

 

[SIDEBAR]

 

FLEET FINANCIALS

Rose Chauffeured Transportation Charlotte, N.C.

• Vehicles: 35

• Revenue first four months of 2008: $1,554,478, up 18%

• Revenue first four months of 2007: $1,309,324

• 2007 revenues: $4.7 million

• 2008 projected revenues: $5.6 million

• Average annual growth 2002-07: about 20%

• Average rides: 100 per day

SEDAN RATES:

• Basic sedan rate: $48

• Fees: transportation, 12%; gratuity, 18%; fuel surcharge, 7%

• Total hourly sedan rate: $65.76

PER VEHICLE REVENUES/BENCHMARK GOALS FOR APRIL 2008:

• Limousines: $9,537/$12,000

• Mini-buses: $14,590/$15,000

• Sedans: $11,118/$10,000

• SUVs: $10,558/$8,000

• Vans: $12,601/$12,000

 

[END SIDEBAR] 

 

Martin Romjue Editor
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